The tiny Beijing stock exchange is attracting more companies hoping to list this year than China’s two dominant mainland markets combined, as the previously-overlooked venue benefits from investors’ renewed appetite for small cap technology stocks.
Established by President Xi Jinping in September 2021, the exchange was for several years regarded as something of a joke by investors, with a market capitalisation of just $118bn, compared with a total of around $17tn across Shanghai, Hong Kong and Shenzhen.
But it has received 113 applications for initial public offerings so far in 2025, according to data provider Wind, more than Shanghai and Shenzhen put together. The Beijing exchange’s BSE 50 index has also risen 37.6 per cent this year, compared with 2.5 per cent for the country’s benchmark CSI 300.
The boom in applications has been driven by looser listing requirements than for China’s other exchanges and renewed interest in the country’s microcap technology stocks following the huge impact of AI sensation DeepSeek.
“After the first few years people realised it [the Beijing exchange] is here to stay. It’s going to be a major force,” said Dragon Tang, a professor of finance at Hong Kong University.
“People now take it more seriously, it’s no longer just propaganda or a pet project by the leaders,” he added.
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The exchange was set up to be a “hub for serving innovative small and medium-sized enterprises”, Xi Jinping said at the time. Its founding dovetailed with China’s increasingly urgent push to foster high tech manufacturing, which has emphasised fostering small innovative companies — dubbed “little giants” by the state — that can secure the country’s supply chain from external shocks and drive economic growth.
Its purpose was to provide alternative financing for unprofitable but innovative businesses and to act like “venture capital in the secondary market”, said Emily Dong, head of equities at Conning Asia Pacific. “That’s the main reason they set up this board.”
Things did not initially go according to plan. Hong Kong, Shanghai and Shenzhen all have boards for smaller companies to list, while low liquidity in Beijing deterred companies and investors.
“Originally there were high hopes for it, but it actually didn’t live up to it for many years”, said Robert Wu, chief executive of BigOne Lab, a Beijing-based research company.
However, the exchange has benefited this year from broader excitement over small Chinese technology companies after the rise of DeepSeek, defying muted overall market sentiment in mainland China.
In a sign of the renewed interest in smaller companies, China’s CSI 2000 index, the broadest tracker of small cap performance in China, is up 17.6 per cent this year.
“People actually think small caps can have more bottom up stories,” said Winnie Wu, chief China equity strategist at BofA Global Research, adding there are interesting domestic focused small caps in areas around hard tech — innovative hardware — as well as robotics and automation.
The exchange has the most relaxed requirements for IPO applications of any Chinese board, which has made it an attractive place for small- and medium-sized tech firms to raise capital, said Angela Zhang, a law professor at the University of Southern California and expert in Chinese tech regulation.
“It’s becoming a kind of incubator for Chinese start-ups,” Zhang said.
The Beijing stock exchange has attracted attention from businesses with domestic customer bases, said Paul She, head of capital markets at Forvis Mazars, in part because of China’s capital controls, which make it hard to move money back to the mainland.
Chinese semiconductors and AI companies have “particularly weak listing motivation” in Hong Kong because they have already achieved premium valuations in pre-IPO funding rounds that are often higher than comparable peers listed in Hong Kong, added She.
Although only six companies have actually proceeded from application to listings in Beijing so far this year, substantially fewer than China’s other boards, Yansheng Wu, partner of capital markets services at PwC China, said the exchange “shows promising long-term prospects — both in terms of the number of listed companies and the quality of those listings”.
Businesses listed on the Beijing exchange include battery manufacturers, machine tool companies and a manufacturer of data centre cooling equipment.
Following this year’s strong gains, the price-to-earnings ratio of the overall index was 51 times in June, almost double that of the US’s S&P 500 index.
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There are signs mainland China’s other exchanges are trying to compete more for small listings. The Shanghai stock exchange recently released guidelines for its new “sci-tech growth tier” within the STAR market, which will also aim to make it easier for unprofitable technology companies to list.
Nevertheless, Beijing has some structural advantages that could see it becoming more relevant over time.
“In Beijing you have this ecosystem of research, policy information, finance,” said Yuhao Yang, an analyst at China Policy.
Liquidity on the exchange, one of its biggest drawbacks, has improved, said Kenny Ng, a securities strategist at Everbright Securities International.
“For companies trying to list, the attractiveness of the Beijing Stock Exchange is growing and growing,” he said.